Oracle-Sun, EU: steam boiling up

A commentator hailing from Oracle’s own backyard, – Chris O’Brien from the San Jose Mercury News – likens the “fog rolling past Oracle’s shimmering Redwood City towers last week” to the “steam coming out of the ears of Larry Ellison when he learned the European Union had officially objected to his purchase of Sun Microsystems.” Referring how it might be tempting to compare this match to Oracle’s prior 2004 battle with the US Department of Justice, in its acquisition of PeopleSoft, O’Brien cautions that “despite some similarities on the surface, there are substantial differences.” This time he argues, “Oracle has an even tougher fight on its hands that it would be wise to avoid.” Here are his reasons:

PeopleSoft was fundamentally a “..healthy company with rock-solid customer support when Oracle made its hostile takeover bid.”

PeopleSoft was absolutely “..critical to Oracle’s grand strategic ambition to roll up the business software industry.”

PeopleSoft’s leadership, who “took a brilliant but controversial step and created a ‘Customer Assurance Program,’ a guarantee that Oracle would have to refund customers two to five times their money if it failed to support PeopleSoft products after an acquisition.”

In contrast:

Sun is now “on life support” and for “…every day this drags on, Sun is becoming a little less valuable.”

Buying Sun is not that critical for Oracle. (though it is for Larry Ellison)

Sun’s misguided leadership “figured it would sail right through last summer and didn’t put sales safeguards in place” and is now missing in action; especially Jonathan Schwartz, who was “responsible for paying $1 billion in 2008 for MySQL, which has come back to haunt the company.”

As for the outlook, O’Brien concludes: “The real danger here is that Ellison learns the wrong lesson from PeopleSoft and convinces himself he’s invincible, and that this is a cause worth taking the distance. It’s not. A great leader knows when to walk away. That’s what Ellison should do here. Sell MySQL, which is a pipsqueak. If he fights, he’ll find this a case where he may well win the battle but lose the war by getting stuck with a mortally wounded Sun.”

A columnist from Seeking Alpha advises Oracle to dump Europe before it dumps MySQL and “just consummate the merger without EU approval and don’t do business in the EU” based on his analysis that shows that there is a low return on investment for Oracle to stay in Europe. He is countered by Andy Patrizio from InternetNews, who says that Oracle can’t afford to go far if it does not win over the EC. “Oracle has to stay in Europe” he states.

An editorial commentary in The Financial Times argues on how both parties (Oracle and the EC) “stumbled into this disagreement by accident.” Describing it as an “odd dispute,” it points to how Oracle has “paid the price” ” for not showing “due deference to regulators” in Brussels.” On the other hand, the EC ” in asserting its right to form its own view..is now in danger of over-reach.” The FT editorial considers that “There is still time to overcome this stand-off and a compromise is still the most likely outcome, but it will require a greater willingness on both sides to give ground than has so far been the case.” And in contrast to other blog commentaries, it does not consider this a showdown between antitrust regulators on both sides of the Atlantic. Instead, it point to how US and EC regulators have actually “aligned their work on merger approvals more closely. For businesses, this has lessened the risk that different standards will be applied to international mergers.”